How to Improve and Maintain Good Credit Scores

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Having good credit scores is key to enjoying several benefits. Key among them is the fact that you can secure a loan without a lot of requirements. Individuals with good scores are likely to get credit card approvals faster and can apply for utilities without any deposit. Other benefits include the ease of securing good rates on insurance, higher loan limit approvals, increased negotiating power and low-interest rates on credit cards or loans.

Minimum Credit Scores

There is no minimum credit score needed to apply for most loans or credit cards. However, you are less likely to qualify for a loan or credit card and less likely to receive favorable rates with a low score. If you are trying to qualify for a conventional loan or credit card with a low credit score, you may wish to wait until your credit improves to ensure you get the best rates possible.

Some mortgage servicers such as the FHA provide general guidelines for those with credit scores on the lower end:

• FHA mortgage loans require a minimum of 580 or higher with a 3.5% down payment.
• For FHA applicants under 580, qualification for a loan is still possible, but a 10% down payment would be required along with meeting other requirements. See FHA’s site for more information.

How to Improve Your Credit Scores

Review your credit information and evaluation the reported information. Since your credit scores use information drawn from your credit report, your credit activity provides a continually-updated basis of data about how responsible you are with the credit you’re currently using. Check out the Experian website to learn more about:

• How choices that you make can improve your credit score
• Why using secured credit cards can improve your credit history
• What a credit repair service can – and can’t – do for your credit
• How to protect or restore your good credit after major life events like marriage, divorce, or the death of a spouse
• Why knowing your FICO® Score* is important when you consider making a big purchase
• When you know the kinds of activities in your credit that can affect your scores, you can work to take better care of your credit, too. Late payments, liens or bankruptcies all have varying levels of impact on credit scores since they’re reflected on your credit report, too. Getting familiar with your credit report can help you see the impact these kinds of events can have in your credit.

Here are a few ways to improve your credit and ensure it remains impressive.

Pay bills on time

As a human being, you obviously incur regular bills which may include electricity, water, and gas. These bills are usually charged on a monthly basis with a time limit given within which you should make all payments. To improve your credit score you must pay all your bills before or on the due date. Anyone that is examining your credit history will appreciate the fact that you are committed to keeping all your obligations.

Use designated credit cards

It is common to find people having more than four different credit cards. While this is not necessarily a bad thing it can work negatively on your scores. If each of your credit cards has balances, regardless of the amount, it reflects negatively on your scores. Therefore, it is prudent to pay all of the balances on the credit cards and choose one or two for use on everything you need.

Manage your debts well

All the formal debts you incur have a way of reflecting on your credit scores. If you pay everything on time, it reflects positively even if you have multiple debts. However, if your debts seem to be dragging out and you are missing deadlines, you are likely to get lower credit ratings.

Show off your debt history.

Most people make the mistake of deleting their financial history once they have cleared a debt. It is important for you to realize that handling a debt in a good way can be one of the best ways to showcase your prowess or ability to handle finances. If you received a loan and paid it according to the terms agreed to let the records reflect this information for as long as possible. As your financial history is being scrutinized such records can give you an added advantage.

Limit applications for new cards

If you already have two or three credit cards there is no need for you to apply for more cards. This may give an impression of a person that is disorganized and desperate to make ends meet. The key is to utilize the one or two credit cards you have wisely. As your credit score improves you will be able to get higher limits on your card. This eliminates the need to have more cards.

Be careful on your social networks

An individual or financial institution that is about to commit a significant amount of money in the form of a loan or credit card to you must be aware of everything about you. Indeed there are certain institutions that are likely to examine your Twitter or Facebook page to determine what kind of a person you are. The picture you post and the things you publish on your pages can help them weigh your ability to make prompt payments.

Keep old credit cards open

Closing old credit cards erases the records that may have been created. This works negatively on your scores. By letting them remain open you can build a report that extends far back in time. Ultimately your scores will rely on new and old financial records.

Watch your credit reports

Unless you keep an eye out for your credit reports you may end up overlooking small mistakes that may reflect negatively. Any time you notice a mistake in the report makes it a point to contact the relevant authorities for correction.

Live within your means

Just because you qualify for a loan or credit card does not mean you should use the opportunity to live lavishly. Do not borrow or make purchases on credit unless you really must. It is also important that you know the source of income that you will use to service every debt you incur.

What to Do If You Don’t Have a Credit Score

In some cases, you might not have enough credit history to have a credit score. Depending on your age, there are several ways to establish credit.

If you are under 21, you must have a cosigner or be able to demonstrate that you have an adequate source of income to pay back any credit that is extended. With responsible usage, a parent cosigning a credit card (or adding you as an authorized user to one of their accounts) is a great way to help establish a positive credit history.

For others, the best way to establish credit may be to work with your bank or credit union to open an account with a small credit limit to get you started. Opening a secured credit card is another way to get started building your credit. Then, with time and good account management, a good credit history (and scores) will be within your reach.

Common Credit Score Facts

Credit Reports and Credit History

Credit scores are not included with credit reports and are not stored as part of your credit history. Your credit score is calculated only when your credit score is requested. Credit scores can change over time, based on your credit history—including late payments, amount of available debt, and more.

Joint Accounts

Joint accounts are meant to help individuals who cannot qualify for a loan by themselves. With joint accounts, all the joint account holders, guarantors, and/or cosigners are responsible for repaying the debt. The joint account, along with its credit history, appears on the credit report for all account holders. When all payments are made on time, the joint account can help build positive credit. However, if someone defaults on payments, all the joint account holders will see the default on their own credit reports. Depending on the severity of the late payments and negative information, everyone’s credit scores could be impacted significantly.

Marriage

When you get married, your credit scores (or reports) won’t merge with your spouse’s. Joint accounts you share may appear on both of your credit reports, but your credit history will remain independent.

Checking Your Own Credit

Another common question is whether checking your own credit report or score can hurt it. The answer is no. Checking your own credit scores doesn’t lower them; it creates a special kind of inquiry (known commonly as a soft inquiry) that isn’t considered in credit score calculations. Without the risk of harming your scores by checking your credit report and scores frequently, don’t steer away from viewing them as often as you need to.

www.debt.org
www.experian.com

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